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Published: Wednesday, 8/10/2011

Iffy retail outlook has shippers at sea

REUTERS

NEW YORK -- The struggling U.S. economy is beginning to take its toll on shipping companies that should be experiencing a big boost but instead are finding retailers delaying decisions about imports for the holiday shopping season.

Retailers that had to discount sharply in 2008 because they had too much product on their shelves when the economy tanked are delaying orders as a series of weak economic reports and a plunging stock market ignite fears of back-to-back recessions.

"They may be waiting as long as possible to ship. … They want to make sure the economy is on solid footing and that the consumer is OK," Kevin Sterling, an analyst at BB&T Capital Markets, said. "If we get to the middle of September or even the end of September and we don't see anything, that's a red flag.

"By the middle to the end of September, you've got to make a decision as a purchasing manager: Do I believe in Santa Claus this year? If you think he's not coming, you're going to ship a lot less, and if you think he is, you'll ship more."

Delays by retailers in finalizing orders for the all-important holiday season, and even a back-to-school season that has moved into September in recent years, makes it harder for container vessels to impose peak surcharges on goods coming from China and other parts of Asia.

Some carriers also face a compressed-but-intensified peak period.

"[Carriers] are concerned. They are trying to get the freight rates back up. The lack of demand is really hindering them and they aren't being successful with that," said Ben Hackett, founder of Hackett Associates, which tracks trade every month at each of the biggest U.S. seaports for the National Retail Federation.

Mr. Hackett now expects West Coast imports to be up only about 2.4 percent this year. Last year, they rose 17 percent.

"In North America, usually, prior to the Thanksgiving sales [and] back-to-school sales, you have what they call peak season when volumes increase -- usually late July, early August. The carriers have been trying to introduce a peak season surcharge …Currently it is delayed to the 15th of August. Even that looks doubtful." Mr. Hackett said.



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